Nucleotide phosphohydrolysis by the ecto-5'-nucleotidase (CD73) is the main source for extracellular generation of adenosine. Extracellular adenosine subsequently signals through four distinct adenosine A receptors (Adora1, Adora2a, Adora2b, or Adora3). Here, we hypothesized a functional role for CD73-dependent generation and concomitant signaling of extracellular adenosine during diabetic nephropathy. CD73 transcript and protein levels were elevated in the kidneys of diabetic mice. Genetic deletion of CD73 was associated with more severe diabetic nephropathy, whereas treatment with soluble nucleotidase was therapeutic. Transcript levels of renal adenosine receptors showed a selective induction of Adora2b during diabetic nephropathy. In a transgenic reporter mouse, Adora2b expression localized to the vasculature and increased after treatment with streptozotocin. Adora2b(-/-) mice experienced more severe diabetic nephropathy, and studies in mice with tissue-specific deletion of Adora2b in tubular epithelia or vascular endothelia implicated endothelial Adora2b signaling in protection from diabetic nephropathy. Finally, treatment with a selective Adora2b agonist (BAY 60-6583) conveyed potent protection from diabetes-associated kidney disease. Taken together, these findings implicate CD73-dependent production of extracellular adenosine and endothelial Adora2b signaling in kidney protection during diabetic nephropathy.